E-invoicing has steadily grown in popularity due to its ability to overhaul the manually-intensive, paper-based accounting processes of traditional invoicing. However, Asia is markedly behind the curve with this trend compared to Europe and the United States, largely due to the low cost of labour in the region. Yet as the fast-paced global economy becomes increasingly integrated, the business case for implementing e-invoicing is becoming increasingly favourable for shared service centres in Asia. Particularly since China’s State Administration of Taxation officially announced the electronic value-added tax (VAT) invoice system, which became available nationwide from 1 December 2015.
To learn about the implementation process involved in e-invoicing, we spoke with Ross Mackay, DHL’s Asia Pacific Head of Global Finance Services, winner of the 2014 SSON award for best finance transformation and driving force behind DHL’s e-invoicing journey.
To familiarise us with DHL’s new e-invoicing operational process in Asia, Ross outlined the two main areas of implementation that have occurred within the last year. Firstly, he described how they rolled out an optical character recognition (OCR) solution from Basware, followed by the adoption of free e-invoicing platform Tradeshift.
Basware, implemented in Q2 of 2015 allows DHL suppliers in Asia (of which there are thousands) to directly email their invoices, or scan their paper copies, which are queued and processed by its OCR technology. By the time DHL’s P2P agents receive the invoice, most if not all of the data has already been captured and does not need to be manually keyed in by the company’s agents. Instead, all they need to do is validate the invoice by ensuring it matches a correct purchasing order and capture the general ledger coding details. However, Ross explained that if the purchasing order is already in the system then the invoice is automatically processed, greatly speeding up the payments cycle.
The other half the equation falls to Tradeshift, which was rolled out in Australia at the beginning of 2016, with a range of countries in Asia soon to follow. Initially, DHL looked at its high-volume suppliers and encouraged them to sign up to this free e-invoicing platform:
“Firstly, we needed to identify our target audience. If you have thousands of suppliers then it’s not efficient to chase up every single one of them and encourage them to move to Tradeshift. We identified who was most likely to find the platform useful and then approached them, outlining the benefits which included a quicker and simpler processing cycle.”
After Tradeshift was rolled out and comprehensively tested, DHL approached all of its suppliers who had been identified as viable beneficiaries of the new system. Together, Basware and Tradeshift have had a fundamental impact on DHL’s invoicing process and supplier relationships.
Calculating the Benefits
The benefits of reducing the amount of manually keyed-in invoices are self-evident and scalable. Automation reduces the agents’ workload while greatly reducing the chance of administrative errors. Not only does this lead to operational cost savings by reducing the need for manual data entry, it gives a much more accurate and up-to-date picture of the company’s overall invoicing state.
Subsequently, this greater sense of visibility can aid the implementer in a variety of different ways. By accurately accounting for how many invoices are in the system waiting to be paid, the company has a much clearer understanding of its backlog and can act accordingly. As Ross said:
“The move to e-invoicing helped tremendously in terms of visibility. Through Basware we can manage our capacity much better because we can see where our backlogs are and move agents around from country to country, when and where they’re most needed.”
Ross estimated that the implementation of the technology has led to an increase of invoice processing by approximately 30%, with greater benefits to be realised once Tradeshift has been fully rolled out and adopted by the majority of DHL’s applicable suppliers.
Furthermore, better visibility of their invoicing situation means that DHL is far better placed to understand its overall liability, as it consistently knows how much is owed to suppliers and when their invoices need to be paid, helping them avoid committing to actions that are beyond their current resources.
“Before Basware, at the end of each month there we had to chase up the cost centre managers and get them to find out how many invoices they had left to process. That’s quickly becoming a thing of the past because now we can see what’s not been processed just by looking at Basware, or what’s just sitting in Basware waiting to be approved. This gives us far greater ability at the end of each month.”
The benefits of e-invoicing aren’t all on the implementer’s side however. Suppliers also stand to gain significantly, which is what has helped DHL convince its own suppliers to adapt to their e-invoicing process.
Primarily, the faster invoicing cycle leads to more efficient processing and payments, meaning that suppliers get their money on time with fewer mistakes or delays. Considering that so many of DHL’s suppliers are SMEs, this is a crucial consideration since cash flow is a problem that often hits smaller businesses harder than big multinationals.
Additionally, with e-invoicing, suppliers no longer have to print out a physical copy of their invoice and send it via the local post system. This represents cost savings on office supplies as well as “post & packaging”. These savings may be minimal on a “per invoice” basis but over time they can quickly add up.
Ross also explained how the new system has helped improve relations between DHL and its suppliers:
“E-invoicing has helped us massively with supplier queries. Previously, a supplier would call up and ask what was happening with their invoice and if the P2P team couldn’t find it then they would have to ask the supplier to send another copy. Now we’re receiving the invoice much earlier, so most of the time when we have a query about an invoice we can assure the supplier that it’s sitting in the system waiting to be processed. Overall, we have much more easily-accessible information to share with suppliers than we did in the past, which makes it easier to deal with queries quickly and accurately.”
While the benefits of adopting e-invoicing can be significant, providing that its implementation is well-conceived and smoothly coordinated, this process is not without inherent difficulties that must be addressed from the outset.
For DHL, one of the key challenges was to convince suppliers that making the shift from paper to electronic invoicing would help them get their invoices processed more quickly, hence enabling them to be paid more promptly.
“For many suppliers, they still love paper because there’s still a vague sense that somehow it’s more real to have a piece of paper in your hand rather than seeing the invoice on the screen. To them it’s more tangible and as a consequence they’re often reluctant to abandon it. So it’s often a significant challenge to persuade clients to move away from that way of thinking.”
Ross’ description of this particular aspect of the Asian business mentality highlights the overall challenge of treating the entire process of e-invoicing as an exercise in change management. He explained that it’s necessary for the implementer to understand what the change will mean to their suppliers as well as themselves. Subsequently, e-invoicing implementers need to take the time to ensure that their suppliers understand how the new system works and how they can guide them through it to make the transition as painless as possible.
Other challenges for DHL were of a more technical nature, as Ross explained that they had to ensure that their coding matrixes were up to date to handle the suppliers who were utilising Basware or Tradeshift. Incorrect coding would lead to invoices being sent to the wrong cost centre and other inconvenient errors but Ross added that fortunately this process could be improved quickly:
“It’s necessary at the beginning to be on the lookout to improve the process and reduce the number of returned invoices and get the data right first time. Fortunately, this can be handled fairly quickly because the reality is that you’ll get it wrong once and then update your matrix and it should be fine for the next time.”
Another key challenge is justifying the cost in order to get the process started.
“These technological solutions aren’t necessarily cheap. Obviously, if you implement it in a global sense then the costs will come down significantly, so that’s an investment that’s fairly easy to justify. However, in Asia, with its lower costs of full-time employees, the cost of the technological investment may not provide as much benefit as choosing to simply hire the equivalent number of people.”
DHL has managed to overhaul its invoicing process in key Asian territories which will serve as the model for further e-invoicing implementations in the near future. By carefully considering the key challenges specific to each region and supplier type, the company has managed to get their suppliers on board with the new system and subsequently both sides have leveraged the benefits.
When asked for any final piece of advice for Asian companies looking to follow in DHL’s footsteps, Ross advocated a measured, systematic approach that can help companies avoid overreaching themselves:
“The key thing is to get the best benefit out of your OCR solution before you look at e-invoicing. There’s so much you can do with the technology to improve the invoicing process for both you and your suppliers. For example, you can set up templates for suppliers so you can process their invoices easily. The danger is in trying to do both OCR and e-invoicing at once and not managing to properly leverage the benefits of either technology.”
The bottom-line is, take a step-by-step approach to your e-invoicing implementation, so to allow sufficient time to optimise your OCR solution before moving into full e-invoicing.
To learn more about e-invoicing implementation, don’t miss our upcoming event, SSO Suzhou, 21st – 22nd June 2016, featuring Ross Mackay, DHL’s Asia Pacific Head of Global Finance Services. Click here to download the agenda